Brother-in-law is included in the definition of “relatives” under the Income Tax Act. Under certain situations, some gifts are exempt from tax. Gifts received from a “Relative” is one of those situations.
On the transfer of shares, there is no tax levied. However, on the sale of shares, capital gains are taxable in the hands of the receiver. If there is a loss, you can also claim the same in your ITR.
Yes, shares received as gifts from parents & wife will be treated in the same way as both are also included under “relatives”.
I gifted some shares to my father in Dec 2022 using Zerodha. Then my father gifted all those shares back to me in Jan 2023 using Zerodha.
In this case, it’s my understanding that my father doesn’t owe any taxes as he didn’t sell a single share I gifted him and transferred them back to me. Also, I don’t owe any taxes when I gifted the shares to my father initially.
My questions -
Please correct if my above understanding is incorrect.
On Zerodha’s Tax P&L, all these gifted transactions are shown as sold transactions and calculated realized profits/losses accordingly for both me and my father. I believe this is absolutely incorrect. I have been requesting them to correct this but they are not being very helpful. So, the problem is I cannot use Zerodha Tax P&L for the tax return filing purpose. What are my options to file the tax return accurately without considering the gifted transactions as sold transactions?
Do my father is required to report the gifted amount from shares as “income from other sources”? I ask because he gifted the shares back to me and no longer has any income from these transactions.
In my case, do I require to report the gifted amount from shares that my father gifted me as “income from other sources”? I ask because it’s not an extra income but I received my money back in the form of shares that I gifted him initially.
Your response is very appreciated. Thank you so much!
In this case, you had gifted some shares to your father which have been gifted back to you in the same financial year, hence capital gain would not be attracted as of now, when these shares are sold by you at that time capital gain shall be levied.
Although these shares have been returned to you, still it is better representation to report gift received in the ITR for yourself and your father.
At the time of return filing you can remove the transactions for gifted shares and file the ITR.
Hello Team,
I have following questions on requirement of tax deed for gifting shares/money to relatives
In case of gifting shares , Zerodha sends out an email and maintains record of gift transfer. Is it a sufficient document for scrutiny by income tax authorities or gift deed is mandatory.
In case of transferring money , is bank record of transfer transaction a sufficient document or a separate gift deed is mandatory.
Asking this question because creating gift deed is a hassle when there are multiple gift transfers and digital/online platform anyway keeps record of transfer.
Even if Zerodha sends out an e-mail, it is not sufficient from the Income Tax scrutiny perspective. The income tax authorities would require a gift deed in case of scrutiny.
A mere bank transfer cannot be categorized as a gift. So, a gift deed would advisable for a bank transfer as well.
Drafting a gift deed is not compulsory but creates a valid supporting record for future reference.
Thanks @Shrutika_Shah for your response. I have some further questions - Is it mandatory to create gift deed before the transfer or can it be done after the transfer as well. In case , it can be done afterwards , is there a time limit i.e. by certain no of days after the actual transaction took place. Also, for multiple transfers on different dates , can one gift deed be created or separate gift deed is required for multiple transactions/transfers.
There is no such requirement to draft a gift deed before transfer. In fact, you can draft it after the transaction an mention the details of the transaction in the deed as well. You can draft a deed for multiple transfers.
Thankyou very much @Shrutika_Shah . Just one more question. Gift deed for share or money transfer , does it need to be prepared on a stamp paper or plain paper based deed is also fine.
I Gifted 18 lakhs worth of shares to my mother. Will there be tax libaility on her if the shares are not sold so far? and do i need to show them in her return
While showing in schedule exempt income of her return i saw there is only others opetion where this case fits in. Shall i show there and type details " received 18 l shares from son exempt under section 52 vii.??
Further as per my DP those shares have been shown as part of my capital gains though there is no mention in my AIS. Do in need to pay capial gains tax on thos shares?
Kindly guide for above queries
When you gift shares to your mother and she does not sell them, there is no tax liability either on you or on her.
Your mother is required to report the same as a gift which will be exempt as it is received from a relative. In the ITR, this should be disclosed under IFOS > Exempt Income > Gift on Quicko.
If those shares are being shown as a gift to your mother then there arises no tax liability on you. When these shares are sold, your mother will be required to pay the capital gains tax.
Hi i have one more doubt, there are two different schedules other sources and exempt income. Both are not having Gift as a row. Shall we fill in exempt income under others exempt income category
Hi, I wish to transfer all my stocks to my mother (housewife and no income).
Does clubbing gets invoked here ?
Who has to pay taxes on the dividend income received by her after that transfer?
Also, let me know in which case clubbing provision gets invoked (only with Spouse?)
Why is there a need to have a gift deed if we can mention it as exempt income in ITR.
Should I also mention in ITR, that I have gifted those shares, if so, at which place ?
If you transfer the shares without adequate consideration, it will be a gift for your mother. She will be required to report the same under IFOS > Exempt income.
You are not required to show the gifted shares in your ITR.
The dividend on those gifted shares will be taxable to your mother.